Best Buy, RadioShack drop after analyst pooh-poohs takeover rumor

The Fed increased the overnight rate charged to banks by a quarter-percentage point Wednesday afternoon to 5%. In its notes surrounding the rise, the Fed said it would adjust rates on an as-needed basis, or not. That left investors with no clear indication of whether rates will rise again when the Fed meets in late July.

The S&P Retail Index
$RLX
showed little reaction immediately after the rate decision was announced, but slipped in late-day trading. At the close, the index stood at 483.56, marginally lower.

Among index components, shares of Federated Department Stores turned lower by 1.2% to close at $77.98, off 97 cents. The parent of Macy's and Bloomingdale's turned in a steep first-quarter loss and offered a weaker-than-expected forecast. See full story.

Other department-store stocks were off modestly ahead of earnings results Thursday and next week. Shares of J.C. Penney
JCP, -2.04%
backtracked by 65 cents to $66.92 while Dillard Department Stores
DDS, -1.72%
shares lost 16 cents at $27.03.

Shares of Best Buy
BBY, -0.95%
lost 1.4%, or 81 cents, to $55.76 while RadioShack Corp.
RSH, +5.28%
fell back 2.1% to finish the session at $17.90, giving back most of Tuesday's rumor-inflated gains.

Goldman Sachs analyst Matthew Fassler told his clients he didn't give any credence to speculation of a link up between Best Buy and RadioShack. However, he said, it "marks the beginning of the inevitable discussion of alternative paths for RadioShack, which is, in our view, underperforming the potential of its concept and niche."

Meanwhile, Circuit City Stores
CC, -0.27%
the nation's second-largest electronics retailer, saw its shares hit a mulit-year high of $31.36, closing at $31.29, up 1.8%.

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